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ACCA Applied Skills · Corporate and Business Law (Global) · Company directors

Kestrel Ltd's board appoints Tomas as a director. Tomas is an undischarged bankrupt, and under the applicable law a bankrupt is disqualified from acting as a director without court permission. Tomas attends board meetings and votes on decisions. Which statement is most accurate?

Tomas may face personal liability for acting as a director while disqualified. Nevertheless, a defect in a director's appointment or qualification does not usually invalidate the company's dealings with third parties who acted in good faith, so the company can still be bound.

  1. AHis acts are void as against third parties acting in good faith, and the company can never be bound
  2. BHe may be personally liable for acting while disqualified, but the company may still be bound to third parties dealing in good faithCorrect
  3. CThe disqualification applies only if the members were told about it at the time
  4. DBecause the board appointed him, the disqualification does not apply

Explanation

Disqualification is a personal bar on the individual and may carry criminal or personal liability for acting. Under the protective rules for outsiders, defects in a director's appointment or qualification do not generally invalidate acts done in good faith by the company with third parties. Option one overstates the effect, and board appointment cannot override disqualification.

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